S&P 500 Futures struggle to copy Wall Street’s moves amid sluggish yields, covid woes

• Market’s optimism fades amid lack of major data/events, virus woes from China.
• Eight-month low US CPI bolstered trader’s confidence the previous day, Beijing reports a jump in covid cases.
• S&P 500 posted the biggest daily jump in three years.
• 10-year US Treasury yields dropped the most in 2022 before latest inaction around monthly low.

Global traders remain mostly inactive during early Friday, after witnessing a heavy risk-on mood, as a lack of major positive catalysts join the risk-negative headlines from China. Reassessment of the previous day’s solid move and bank holidays in the US and Canada also seem to challenge the market’s moves of late.

While portraying the mood, the S&P 500 Futures print mild gains around 3,970 following the biggest daily jump in nearly 2.5 years. That said, the US 10-year Treasury yields remain inactive around the monthly low near 3.81%, flashed on Thursday, after registering the heaviest slump since early December 2021.

“China’s daily Covid infections exceeded 10,000 for the first time since April, with Beijing’s cases at the highest level in more than a year, as the country’s top leaders urged more targeted restrictions aimed at controlling the virus,” said Bloomberg. The news joins fears of economic slowdown in the UK and Eurozone to challenge the market’s previous optimism.

That said, lower-than-expected prints of the US Consumer Price Index (CPI) for October, 7.7% YoY versus 8.0% expected and 8.2% prior, bolstered the hopes of the US Federal Reserve’s (Fed) softer rate hike in December. The concerns also gained support from the latest Fedspeak as Dallas Federal Reserve President Lorie Logan said that October CPI inflation data is a welcome relief while adding that (it) may soon be appropriate to slow the pace of rate increases. On the same line, Federal Reserve Bank of Philadelphia President Patrick Harker said on Thursday that the US Federal Reserve could slow the rate hike pace in the coming months, as reported by Reuters. It should be noted that Kansas City Federal Reserve President Esther George, Federal Reserve Bank of Cleveland President Loretta Mester and San Francisco Fed President Mary Daly also recently promoted easy rate hikes for future meetings.

With this, the CME’s FedWatch Tool signals a nearly 80% probability of the Fed’s 50 basis points (bps) rate hike in December versus around 55% just following the last week’s Fed meeting.

Moving on, the first readings of the US Michigan Consumer Sentiment Index (CSI) for November, expected 59.5 versus 59.9 prior, may join the headlines surrounding coronavirus to entertain the traders. However, receding fears of the global central bankers’ aggressive rate hikes could keep the markets positive, which in turn could weigh on the safe-havens like the US dollar.

Also read: Forex Today: Dollar hurt by optimism